Indian markets outperform EMs despite global headwinds

SummaryIndian markets have outperformed most of its emerging market peers since March even as global markets have faced headwinds from the Ukraine crisis, militant attacks in Iraq and Argentina debt crisis during this period.

Indian markets have outperformed most of its emerging market peers since March even as global markets have faced headwinds from the Ukraine crisis, militant attacks in Iraq and Argentina debt crisis during this period.

The BSE Sensex gained 22.14% in dollar terms in this period, which has only been improved by Brazil’s Ibovespa, which has gained 23.75%. Even in YTD, the 30-share Sensex has gained 22.1% beating most of its peer markets. Only Jakarta Composite has done slightly better with gains of 22.3%.

Even as Indian markets are second most expensive compared with other emerging markets with the Sensex trading at p/e multiple of 22.1, the foreign institutional investor (FIIs) flows remain highest in Indian markets at $11.79 billion.

Experts believe Indian markets are likely to continue to see FII flows with bulk of its emerging market peers facing political and economic issues. “Given growth concerns in China (CY15E consensus forecast growth is 20 bps below CY14E), political issues in Thailand, geopolitical risks for Russia and a growth decline in Brazil, these markets have continued to struggle,” Credit Suisse added.

In YTD, Russia’s Micex has declined 20.7% in dollar terms with tensions between Ukraine and Russia escalating. Jakarta Composite has been the best performer with gains of 22.3% in YTD, followed by the 30-share Sensex which has gained 22.1% in this period. Brazil’s Ibovespa (13.7%), Taiwan Taiex (5.4%), Jalsh (7.4%), Kospi (3.8%) and Hang Seng (4.7%) and Shanghai Composite (1.6%) all trail Sensex in YTD.

Foreign brokerages remain bullish on Indian markets. “We maintain that the Indian markets have been driven by improving risk appetite globally as well as a bottoming out of growth, and not just the change in government. Thus, while some in the market may be disappointed by the pace of change driven by the new government, the broader market is likely to still do well,” Credit Suisse said in a recent report.